IBM Cases Level Playing Field for Taxpayers

Photograph of an old personal computer with "IBM" in green letters on the screen.

Starting with an informal appeal at the tax office and progressing to a hearing before the local Board of Equalization and Review, a property tax appeal typically culminates with a hearing before the North Carolina Property Tax Commission (the “PTC”).


The starting point for any appeal to the PTC is that the county’s valuation is presumed to be correct. It is the taxpayer’s burden to overcome this presumption. In the past, despite the presentation of appraisal reports and other significant evidence, taxpayers often failed to overcome the county’s presumption of correctness in the eyes of the PTC and, therefore, the taxpayer lost. A recent series of cases involving the taxation of IBM computers, however, has significantly leveled the playing field for taxpayers.

In today’s society, there is a tendency to overuse the superlative. We talk in terms of a particular product not being just good, but the best ever; a particular athlete not being just talented, but the greatest in history; or a certain movie not being just entertaining, but the most spectacular of all time. It is with reluctance that I fall into the same trap. Nonetheless, I believe the IBM cases are the most significant property tax cases of the last 30 years.

I refer to the IBM “cases,” not “case,” because what was essentially the same case went before the PTC three times and was appealed to the North Carolina Court of Appeals three times. All in all, the case took almost twelve  years from the date of the apeal to the local Board of Equalization and Review until the Court of Appeals’ last decision (2012).  


IBM Credit Corporation owned and leased to customers a significant number of computers. As required by law, IBM listed the computers for property tax purposes. In accordance with standards promulgated by the NC Department of Revenue, the County valued the computers for property tax purposes by taking the original cost of the computers and depreciating that cost based on the age of the computers. IBM contended the value so determined did not reflect fair market value as required by G.S. 105-283. After its appeal at the county level was denied, IBM appealed to the PTC. The PTC upheld the County’s value, and IBM appealed to the Court of Appeals.


In its first decision in the IBM case, In the Matter of IBM Credit Corporation, 650 SE2d 828 (N.C. Ct. App. 2007) (“IBM I”), the Court of Appeals dealt only with the question of what a taxpayer must show to overcome the presumption of correctness given to the county’s assessed value. In IBM I, the court distinguished between the burden of production and the burden of persuasion. The taxpayer is not required initially to present enough proof to persuade the PTC that the county’s value is wrong, but only to present evidence tending to show that the county’s value is incorrect. At that point, the burden shifts back to the county to prove its value is in fact correct. That the taxpayer only need show evidence to “tend to show” that the county’s value is wrong and at that point the burden shifts to the county significantly levels the field in terms of what the taxpayer must do to prevail. Ultimately, in IBM I, the Court of Appeals found that the PTC failed to apply the burden of production and persuasion correctly and sent the case back to the PTC for further consideration.


On remand, the PTC applied the proper burden shifting analysis and determined the County had met its burden of proof that its value equaled fair market value. IBM again appealed. In “IBM II” (In the Matter of IBM Credit Corp., 689 SE3d 487 (N.C. Ct. App. 2009), the Court of Appeals held that the PTC had failed adequately to address key issues that must be addressed to explain its ultimate decision. Lacking such explanation, the court found it impossible to determine whether the PTC had applied the law correctly.  Given that, the court again reversed the PTC’s decision and sent the case back to the PTC for further consideration.

In the past, the PTC frequently wrote decisions that ruled against the taxpayer without explaining how or why the PTC reached its decision. While a taxpayer could always appeal such decisions, an appeal was difficult to win because the taxpayer could not point to specific errors made by the PTC. Under IBM II, the PTC is now obligated to explain its decision in detail. With a detailed decision, the taxpayer can at least point to the parts of the PTC decision where it thinks the PTC erred.


When the case went back to the PTC for the third time, the PTC again determined that the taxpayer’s evidence of value was not credible. The PTC further concluded, however, it could not use the standard Department of Revenue depreciation schedules because the schedules were found deficient by the Court of Appeals. Given that, the PTC adopted a new theory of value suggested by the County and upheld the County’s value once again. IBM appealed.

In “IBM III” (In the Matter of IBM Credit Corp., 731 SE2d 444 (N.C. Ct. App. 2012)), the Court of Appeals again found the PTC’s decision wanting, in that its new theory of valuation had no basis in any evidence that either party presented when the case was originally heard. The court emphasized that the PTC had determined the taxpayer met its initial burden, and the burden of production and persuasion had shifted to the County. Given that the burden had shifted to the County, and the County’s only evidence had been determined to be deficient, the court concluded that IBM wins regardless of the PTC’s view of IBM’s evidence. Evidencing its frustration that the case was yet again before it, the court reversed and remanded the case to the PTC, but this time with the specific directive to hold in favor of IBM.


It is hard to imagine how much time and money IBM invested in these cases. Nonetheless, for taxpayers appealing their property tax values in North Carolina, they can be thankful IBM stayed the course. As a result, (1) there is a clear burden shifting analysis that the PTC must follow; (2) the PTC must explain in detail the rationale for its decisions; and, (3) once the burden shifts to the county, if the county fails to produce competent evidence supporting its value, the taxpayer wins regardless of the PTC’s opinion of the taxpayer’s evidence.

Image By Ruben de Rijcke - - Own work, CC BY 3.0,


About the Author

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John A. Cocklereece, Jr.

John Cocklereece concentrates his practice on property tax appeals, business law, tax controversies, and estate planning and administration.
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